CONCORD — A former subsidiary of the New Hampshire Local Government Center has hired a Boston bankruptcy lawyer as it struggles with how to make a $17.1 million payment required by a state Bureau of Securities Regulation hearing officer’s order.

.Property-Liability Trust has retained Peter N. Baylor of Nutter, McClennan and Fish, Boston, to help it deal with a requirement that it return the money, which was taken from LGC’s health insurance arm, HealthTrust, and used to subsidize a money-losing workers’ compensation program for almost a decade...According to his biography, Baylor “concentrates his practice in bankruptcy reorganizations, and trademark and copyright law.”

Baylor’s hiring was confirmed by HealthTrust Executive Director and state Sen. Peter Bragdon, who serves as interim executive director of Property-Liability Trust, which provides property and liability coverage, as well as offering workers’ compensation plans, to municipalities and other public entities...His hiring, as well as recent communication to and from Baylor and correspondence involving HealthTrust, has the state Bureau of Securities Regulation concerned that Property-Liability Trust is heading to bankruptcy, said BSR attorney Andru Volinsky...After Baylor was hired, “it becomes pretty evident they are readying themselves for a bankruptcy on December 1,” Volinsky said.

Bragdon denied that Baylor was brought in to guide Property-Liability Trust through a bankruptcy proceeding. He said Baylor’s expertise includes helping organizations deal with debt, such as the $17.1 million payment that Property-Liability Trust does not have the cash to make...“I will state unequivocally that Peter Baylor was not hired to aid in any bankruptcy filing but to aid with the financial implications of the BSR order,” Bragdon said.

Bragdon said it’s unclear whether Property-Liability Trust could even avail itself of bankruptcy. He said federal law bars insurance carriers and government instrumentalities — the state Supreme Court in 2010 ruled that LGC and its operations were public entities — from filing bankruptcy. While state law does not view the LGC entities as insurance carriers — none are regulated by the state Insurance Department — he said federal bankruptcy law could view the entities differently...“I can state definitively that Property-Liability Trust is not pursuing bankruptcy,” Bragdon said. “The board of the Trust is focused on ways to comply with the order.”

Bragdon questioned how the BSR could conclude that Property-Liability Trust is seeking to file bankruptcy. He said the automatic stay of creditor payments during bankruptcy proceedings do not apply to a government agency, such as the BSR, exercising its regulatory powers, meaning the $17 million payment wouldn’t be affected...“I’m very concerned that that type of reckless accusation is something that has the potential to do great harm to the Property-Liability Trust and its members ... by causing needless concern,” Bragdon said. “I think it is irresponsible for our regulator to say that and it calls into question their ability to fairly regulate our organization.”..“Mister Bragdon has a very sophisticated understanding of bankruptcy law for someone who is not planning a bankruptcy,” Volinsky said in response. “I don’t necessarily agree with those conclusions. The concepts Mr. Bragdon is describing are some of the important issues that would have to be worked out in a bankruptcy proceeding.”..In an Aug. 23 letter from J. David Leslie, a Boston lawyer hired by HealthTrust, to Dennis Pavlicek, chairman of the Property-Liability Trust Board of Trustees, HealthTrust called itself, for the first time, a “creditor” of Property-Liability Trust...The term “creditor” is frequently used as part of bankruptcy proceedings to describe a person or entity that is owed money.

“The language of the HealthTrust letter is indicative of bankruptcy,” Volinsky said.Bragdon said he didn’t know why the term was used, but said it is also an accounting term that indicates that Property-Liability Trust owes money to HealthTrust, making HealthTrust a creditor of Property-Liability Trust...The entities were formerly subsidiaries of LGC before a Sept. 1 reorganization that eliminated the LGC moniker and separated LGC’s arms into wholly owned not-for-profit corporations: HealthTrust, Property-Liability Trust and the New Hampshire Municipal Association...Nearly $500 million in assets and liabilities held by limited liability companies that were illegally formed in 2003 by LGC — which prompted the reorganization into not-for-profit corporations — were transferred to the new not-for-profit entities. On Aug. 22, the same day that the various LGC boards approved resolutions to reorganize, BSR Director Barry Glennon sent LGC a letter objecting to the reorganization and asset transfers...Volinsky said the bureau is concerned that the reorganization was done so Property-Liability Trust could set itself up for bankruptcy.

According to Peter Tamposi, a Nashua bankruptcy attorney, who has done no work for either the BSR or any LGC entities, a bankruptcy trustee would be able to “look back” to recover assets that were transferred within the previous 90 days, except in cases of fraud. Dec. 1 is 91 days after Sept. 1...“All of a sudden, there was a September 1 reorganization and transfer of assets that were done in a way that the bureau disagreed with,” Volinsky said. “By itself, it makes no sense. But in the larger context ... they had to transfer the assets more than 90 before the planned bankruptcy filing. Now it makes sense.”..Bragdon, though, said the resolutions transferred not just assets, but all liabilities, including the payments required under the order.

Volinsky said Property-Liability Trust has not provided the bureau with any plan to make the payment. He said that, before the hearings began last year, LGC was offered settlement alternatives that would have “allowed LGC to avoid the current predicament of not being able to make the $17 million payment.”..However, the BSR was insistent that LGC stop subsidizing and discontinue its workers’ compensation program. LGC refused, he said.

Since then, Volinsky said, “we have not, from the outside, seen any steps taken by the Local Government Center or by Property-Liability Trust to indicate they’re preparing to make the payment.”

Bragdon said Property-Liability Trust can meet its obligations to members, but said the $17.1 million payment remains an obstacle and that no solution has yet been determined. Property-Liability Trust does not have enough cash reserves to make the payment and was denied a loan from Citizens Bank...“I will say that PLT has sufficient reserves to cover its claims,” Bragdon said. “And that’s our highest priority.”